Company / division: SoftBank
With all the renewed talk of a Sprint-T-Mobile merger in recent months, one big assumption has been that the Trump administration would view it much more favorably than the Obama administration did, and that it wouldn’t therefore be shot down this time as it was last time. However, Bloomberg reports today that the staff lawyers at the Department of Justice are mostly the same as under the previous administration, even if the leadership and presidency has changed in the interim, and that the lawyers themselves are likely to reach much the same conclusion today as then. In other words, if the deal is to be approved by the DoJ, it will likely happen over the objections and recommendations of the staff rather than with their support. That’s certainly not a deal-killer – SoftBank Chairman Masa Son has cozied up to the Trump administration on issues like job creation, and would presumably curry some favor on that basis. But this does make it more challenging for the deal to go through than many might have assumed. Last time around, the deal was called off before it even formally went through regulatory approval on the basis that it wouldn’t succeed, so I would guess that Son and others would be feeling out the regulatory authorities quietly behind the scenes again this time around to ensure smoother passage.
Indian ride sharing service Ola, which is the main rival to Uber in that market, is in the process of a large fundraising round, with backing from Tencent, SoftBank, and a variety of others. Ola arguably needed additional funding to be able to compete on more level terms with Uber, while Tencent and SoftBank have invested previously in India and the international ride sharing space respectively, their interests merging in Ola. The biggest risk for Uber in India is another failure and ultimate concession of the market to a stronger local competitor along the lines of what’s happened in China and Russia over the past eighteen months, so it’s clearly not about to give up there. But the two have been battling for supremacy for some time now without an obvious winner, in what’s one of the fastest-growing and potentially one of the largest ride sharing markets in the world.
There’s been reporting for months now about SoftBank being interested in taking a stake in Uber, both making a new investment and buying shares from existing stakeholders, but a major sticking point was said to be worries on both sides of the deal about a potential return by Travis Kalanick to a senior leadership role at the company. It appears that those worries are being resolved by a commitment on all sides to keep Kalanick out of those roles as a condition of SoftBank’s investment. Both the potential new funding and that guarantee are good news for Uber, as we’ve seen plenty of evidence recently of the ongoing fallout from Kalanick’s toxic tenure as CEO, not least Uber’s pending London ban. The funding, meanwhile, will be helpful as Uber continues to lose money, though its belt tightening should lower the need to raise many additional rounds before its IPO, especially if that happens as soon as new CEO Dara Khosrowshahi seems to think it should.
Charter Says it Doesn’t Want to Buy Sprint (Jul 31, 2017)
There were lots of reports over the weekend that Sprint and Charter were approaching a tie-up, just after the end of the exclusive negotiating period between the two and Comcast which began just over a month ago. However, Charter has now come out and said that it’s not interested in buying Sprint, which isn’t necessarily the deal being discussed, but is as close as Charter can get to saying it’s not interested in any deal, given that it has a fiduciary responsibility to keep the door to potential acquisition offers open. It’s been fascinating to watch this latest round of SoftBank-driven Sprint merger mania, because whereas last time Sprint was to merge with another player (T-Mobile), it was the US government that shot it down. This time around, the biggest barrier is a lack of willing partners. T-Mobile is certainly far less in need of the merger now than it arguably was several years ago, while the cable companies may well want to merge with a wireless industry, just not the weakest of the big four US providers. Sprint has the poorest network, the poorest financial performance, the lowest overall subscriber growth, and the least subscribers of any of the big four operators, making it the least attractive merger partner of the four, with T-Mobile much more enticing at this point. It’s still possible that SoftBank will try to buy Charter, and if the price is high enough that Charter’s management will feel they have to accept the offer, but it’s clear at this point that this will happen against their stated wishes, which will make any merger process that much more challenging than it would already have been.
Sprint and T-Mobile Holding Informal Merger Talks (May 12, 2017)
This is the second billion-dollar non-acquisition investment Apple has ever made, and both have taken place in the last few months. It’s hard to avoid the sense of a change in strategy here, and an attendant implication about innovation at Apple – that the company recognizes is can’t develop in-house or buy in all the innovation it needs, and will leverage research conducted elsewhere to an increasing extent going forward. Of course, both deals can also be seen as opportunistic with regard to governments, in China (Didi) and the US (SoftBank) as well.